EU executive thwarts Canada lobby on tar sand oil

BRUSSELS/CALGARY, Alberta (Reuters) - Canada's urgent hunt for buyers for its oil is being thwarted as the European Commission sticks to a plan to label fuel from tar sands deposits as highly polluting, deterring refiners bound by environmental rules.

Intense pressure from Canada, seeking new markets to compensate for dwindling U.S. buying and discounted sales, has not convinced the EU executive to abandon its proposal to brand tar sands oil as more carbon-intensive than conventional crude.

"The Commission stands by its proposal," said an EU official, speaking on condition of anonymity. "There is an impact assessment ongoing now that is looking at the methodological aspect of the proposal."

Canada sits on the world's third-largest crude reserves after Saudi Arabia and Venezuela. But the vast majority is unconventional, including tar sands - clay-like deposits that require more energy than conventional oil to extract.

EU member states approved legislation in 2009, called the Fuel Quality Directive, with the aim of cutting greenhouse gases from transport fuel sold in Europe by 6 percent by 2020.

In October 2011, the Commission proposed detailed rules for implementing the law, including default values to rank fuels by their greenhouse gas output over their wells-to-wheels life cycle.

Another source said the Commission was maintaining its value for tar sands - of 107 grams per megajoule - making it clear to buyers that the fuel source had more greenhouse gas impact than average crude oil at 87.5 grams.

There could, however, be compromises over enforcement. For instance, fuel suppliers could report the average emissions of all crudes used in the European Union. Tar sands would be part of that average.
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